Diversifying and transforming Rwanda’s financial services sector

Financial services organisations are a significant driver of growth in Rwanda. Rising financial inclusion – powered by innovation – is contributing directly to growth prospects for the country. These trends are encouraging but there is still much more growth potential to be tapped in Rwanda’s financial services sector. To realise this potential, financial institutions may need to transform or re-think how they operate. Thinking differently can realise big gains and a better contribution to society overall. The only constant is change Fundamental forces of change are sweeping across all industries in Rwanda. The disruptive forces facing financial institutions could impact existing business models but also open up significant opportunities to reach new customers and expand commercial potential. These forces include increasing competition, changing customer behaviour and demographics, new distribution channels, urbanisation, technology, emerging risks and regulation, among others. For financial services, competition is increasing from new market entrants as well as from convergence between industries like telecommunication companies and banks. Customer loyalty patterns are changing, particularly among younger customers. Distribution channels like mobile applications allow businesses to connect with customers in new ways and technology providers offer solutions that can help transform business operations – and the customer experience. A younger demographic of consumers are cut from a different cloth: they want the best service at low cost, and fast. To reach them, distribution channels must be efficient. These channels will also challenge old ways of thinking. Many financial institutions are shifting the focus from brick-and-mortar investment to other platforms, accessible models like mobile banking, agency banking, and services that are relationship-based and relatable. Surveying the market, it is important to understand the opportunities on the ground. These opportunities tend to fall into categories like new customer segments, diversified product offerings that are clearly useful and building deeper trust among customers, employees, regulators and other stakeholders. In Rwanda, majority of the banks are foreign-owned. To position themselves effectively, they can focus on technology and local partnerships. Technology innovation requires wise investment to realise commercial value. Partnerships with third parties including FinTech companies can help financial institutions to realise new opportunities. Many FinTech companies are relatively small, global and specialised. These organisations do not necessarily have to be located in Rwanda, but they will need to customise their solution sets with local know-how. Transformative mindsets Positioning Rwanda’s financial sector regionally requires a transformational mind-set focused on talent and technology, both of which drive innovation. According to the Africa respondents of PwC’s recent 20th Annual Global CEO Survey, business leaders will need to prioritise innovation, digital and technology capabilities, human capital and a competitive advantage in order to manage disruptive forces of change. To realise new opportunities, over 80% of them are looking for skills related to problem solving, adaptability and leadership. Our CEO Survey also shows that the connecting technologies generating the greatest return include customer relationship management systems, data and analytics and social media. In our work with financial services organisations, we have found that these technologies can work together effectively to help transform a financial services company. With the right analytic tools, data can reveal insights that influence customer relationship management. Data generated through social media interactions can influence customer outreach and new innovations. And collaborative tools can help reach customers in new ways and empower employees to work smarter. One insurance and asset management organisation that is active in the East Africa region has empowered talented people, particularly middle managers, to champion aspects of its business transformation strategy. The managers are accountable and responsible; technology is the enabler. Today, the organisation benefits from greater efficiency and stronger market leadership. Investment opportunities Rwanda’s financial services sector is an attractive opportunity for investors who can provide the funding and experience to affect a transformation. But it is important to understand the investor mind-set. Investors are looking for organisations that understand their customers and know which customer segments to target and why. They are also looking for organisations that are committed to financial inclusion, and that have taken clear steps to plan their growth journeys as well as evaluate and monitor key success factors. Many investors want to see detailed value propositions that speak to an organisation’s purpose and contributions to society. Finally, investors are looking for investment opportunities at organisations that are technology-enabled, growth-oriented, distinctive and diversified. Demonstrating these capabilities may require an organisational transformation up front. All successful transformations start with good strategies. A strategy can be straightforward: to be inclusive and to inspire trust. Executing this strategy would require equipping the right people with the right skills to succeed, and employing technologies to enable success. The transformation roadmap should describe how best to get to that point and beyond. We can learn from each other in East Africa, but a cut-and-paste mentality will likely fail. Any transformation strategy must be tailored for a particular business and a particular market, and it must be driven by the desire to change. The writer is Financial Services Leader at PwC Rwanda

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Diversifying and transforming Rwanda’s financial services sector